Brazil crisis deepens with probe of president, top senator

In this May 12, 2016 file photo, Brazil's then acting President Michel Temer whispers into the ear of Senator Aecio Neves, at Planalto presidential palace in Brasilia, Brazil. On Thursday, May 18, 2017, Brazilian federal police searched the office and homes of Neves, a top senator and presidential contender. President Temer is also implicated in the so called 'Car Wash' probe. (AP Photo/Eraldo Peres, File)

Brazil's political crisis deepened sharply on Thursday with corruption allegations that threatened to topple the president, undermine reforms aimed at pulling the economy from recession and leave Latin America's largest nation rudderless.

Stocks plunged, both chambers of Congress cancelled sessions and President Michel Temer's office cancelled his planned activities on Thursday in the wake of a Globo newspaper report that he had been taped endorsing bribery of a former lawmaker.

Protests were planned in several cities and opposition politicians took to Twitter and local news channels to call for Temer to resign or be impeached, arguing his government no longer had legitimacy

"I can't see how Temer survives this," said David Fleischer, a political science professor at the University of Brasilia. "There are just too many people against him now."

The country's main Ibovespa stock index dropped 10 per cent within 90 minutes of opening and trading was stopped for 30 minutes. Analysts predicted the Brazilian real would fall sharply against the US dollar.

The scandal deepened at dawn Thursday as police searched the Rio de Janeiro home and Brasilia office of Senator Aecio Neves, who nearly won the presidency in 2014 and planned to run again next year.

New recordings

Neves is being investigated in several corruption cases related to the 'Car Wash' probe into kickbacks to politicians. He has denied wrongdoing.

Late Wednesday, Globo reported that Neves had been recorded asking JBS meatpacking company executive Joesley Batista for US$700,000 to pay for his 'Car Wash' defence.

Neves' whereabouts on Thursday were not known. Attempts to reach him for comment were not successful.

Globo also reported that Batista had recorded Temer endorsing a bribe to silence former Speaker of the House Eduardo Cunha. In a statement late Wednesday, the president's office said Temer did not participate or authorise any attempt to keep Cunha from reaching a plea bargain with Justice (officials)."

If confirmed, the tape could prove devastating for Temer, whose administration has lurched from one crisis to another since he took office just over a year ago.

Cunha led the impeachment fight that removed Dilma Rousseff from the presidency last year and put Temer, then the vice-president, into power. Cunha was later imprisoned on a 15-year sentence for corruption.

The statement from Temer's office confirmed that the president did meet with Batista in March. According to the Globo report, Batista secretly recorded the conversations with Temer and Neves and gave them to justice officials as part of plea-bargain negotiations.

The report said that when Temer was told Cunha was being paid to keep silent, the president responded: "You have to keep that up, all right?"

Former allies

Globo did not release the recordings or say how they were obtained.

JBS representatives did not respond to emails sent by The Associated Press seeking comment.

Temer and Cunha are members of the same party and were previously allies. However, they appear to have had a falling out amid a growing investigation into corruption involving the state oil giant Petrobras. Since launching three years ago, the 'Car Wash' probe into billions of dollars in kickbacks has put several top businessmen and politicians in jail.

Many believe that Cunha, who was widely viewed as Brazil's most powerful politician before being ensnared in several corruption cases, could provide damaging testimony about dozens of others if he reaches a plea bargain with investigators.

Soon after Wednesday's report, both the Senate and Chamber of Deputies stopped sessions that included work on legislation that Temer's administration is pushing, in hopes of pulling Latin America's largest economy out of its worst recession in decades.

"This climate isn't one in which to work," Rodrigo Maia, president of the lower chamber, told GloboNews.

Globo's reports are the latest in numerous scandals that have plagued Temer, whose approval ratings are hovering around 10 per cent. In April, it came to light that eight of his Cabinet ministers were being investigated in cases related to bribery or accepting campaign donations from Brazilian constructor Odebrecht, one of the central companies in the kickback scheme at Petrobras.

The Eurasia risk consultancy said the new allegation threatens Temer.

If the allegations are proven true, "President Temer is unlikely to finish his term," Eurasia wrote, adding that at the very least the matter will delay major reforms Temer is proposing.